The Wrap-Up: PropThink’s Top Picks this Week

ResMed (RMD) is suing a new and low-cost competitor in the Continues Positive Airway Pressure market. The target, 3B Medical, isn’t taking the litigation lying down and is beginning an ad campaign to reveal the true cost of CPAP devices. PropThink has contended that ResMed’s high margins, great for the bottom line and a strong driver of investor interest, won’t last much longer. Management has been selling, regulations are changing, and we believe that all the signals are pointing to a top for RMD.

Shares of Cubist (CBST) have come down since a positive ruling in ongoing litigation with Hospira. PropThink accurately predicted the hearing outcome just a week before, resulting in a 15% gain. Cubist remains an attractive investment in healthcare, as its candidates address the major need for new antibiotics for use in the hospital setting.

Trius Therapeutics (TSRX) is another great way to be involved in antibiotics. Mr. King called TSRX a buy at $6.50 at the beginning of May when shares dipped on rumors of a fund liquidation. That pick has been good for 25% over the last month. Mr. Napodano’s covers Trius in-depth for PropThink, and his latest article outlined some synergies with Cubist.

Keryx (KERX) continues to demonstrate Zerenex’s phosphate-binding and iron-sparing capabilities. The stock sold off this week, but we believe that numerous catalysts in the second half of the year, de-risked by evidence overseas, should rejuvenate shares.

After revealing its official new strategy for moving forward, analysts are coming back around on Endo Health Solutions (ENDP), a long-time pick of Mr. King’s that was battered and bruised last year. The market seems to like CEO Rajiv De Silva’s plan as well, and ENDP ended the week up 6%.

Zogenix (ZGNX) announced expense cuts to preserve its rapidly dwindling bank account, and there’s reason to believe that ZGNX is having a hard time attracting new investors. Back in May, Mr. King and Dr. Patel outlined why Zogenix (ZGNX) is due for a decline; evidence points to an FDA rejection of the company’s NDA for Zohydro ER, an extended release form of hydrocodone that lacks the abuse-deterrent qualities the FDA has been pounding the table about in 2013.

Investors reacted to new data for BioMarin’s (BMRN) PARP inhibitor BMN-673 by knocking almost a billion dollars of the company’s market capitalization. In our view, the move was way overdone as ‘673 remains one of the top contenders in this promising oncology pathway. BioMarin is one of Mr. Deryugin’s top picks; here’s his latest on the name.

Stemline Therapeutics (STML) also presented at the American Society of Clinical Oncology Meeting this year. Mr. Deryugin’s discussion of the newly IPO’d oncology company, following an in-demand secondary offering last month, was poignant just ahead of a continuing up-trend.

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